BEIJING (Reuters) - The scandal shaking China's ruling Communist Party just as it readies for leadership change was triggered by claims that the wife of one ambitious candidate was involved in the death of a British businessman, said a source with close ties to key individuals involved.

The comments, corroborated by two other sources who also spoke on condition of anonymity, are the first direct account of events which eventually led to this month's downfall of Chongqing mega-city chief Bo Xilai who had very publicly bid for a place in the Party's inner circle later this year.

The source, citing accounts coming from an unfinished central investigation, said it was unclear how much truth there was to the claim by Bo's former police chief, Wang Lijun, but he told Reuters he had "no doubt" that Wang had raised it with Bo.

Wang told Bo in late January that he believed Bo's wife, Gu Kailai, was involved in the death of British businessman Neil Heywood in the southwest Chinese city in mid-November, the source said.

The account helps explain the apparent rupture between the city chief and Wang, who led Bo's widely applauded crackdown on crime in China's most populous metropolis.

In early February, Wang briefly sought refuge in the U.S. consulate in Chengdu, several hours' drive from Chongqing, which suddenly made the growing scandal public.

Bo, 62, and his wife have disappeared from public view since his abrupt removal on March 15 as party chief of Chongqing, and they cannot respond publicly to the rumors and reports. Nor can Wang, who is under investigation.

The Chongqing government has not answered repeated phone calls and faxed questions from Reuters about the circumstances of Bo's downfall and Heywood's death. The central government has said the results of its investigation into Wang's flight to the consulate will be released, but to date it has not offered a detailed account.

BO SCORNS ACCUSATIONS

The Foreign Ministry has also not answered questions about Heywood, with a spokesman saying that he had no information.

In a news conference days before his dismissal, Bo scorned as nonsense unspecified accusations of misdeeds by his wife and said some people were pouring "filth on my family". Gu was formerly a high-powered lawyer.

"Wang Lijun has told central investigators that Gu Kailai turned on the British man because of economic interests and that she wanted to destroy him (Heywood)," said the source, who is generally sympathetic to Bo.

Beijing- and London-based relatives of Heywood told Reuters in separate interviews that they did not suspect foul play in his death. They both spoke on condition of anonymity.

"It's preposterous. The more description (in the media), the darker it becomes," the family member said, occasionally breaking into tears in an interview in the lobby lounge of a hotel on the outskirts of Beijing late on Thursday.

The family denied reports that Heywood was a spy and that he was cremated against their wishes.

"We requested the cremation. We were not forced to do so. We have no doubts about the police report," said one family member.

The British Embassy in Beijing has asked the Chinese government to reinvestigate his death, attributed by Chongqing police to cardiac arrest due to over-consumption of alcohol.

Heywood, 41, was not a heavy drinker, but was a chain smoker. His father, Peter, also died of a heart attack after drinks over dinner at his London home in 2004 at age 63, the family members said.

Bo's dismissal has also raised questions over whether China's leaders will start to attack his popular "Chongqing model" that he said promoted more equitable development in the world's second biggest economy but where much of the population still struggles to make a living.

"The split in the public reflects rifts among leaders over views of Chongqing," said the source.

"Bo Xilai was a bold experimenter who was like a catfish stirring up China's stagnant political pond. His enemies couldn't catch him until now," said the source, who knows Bo and his family and has close ties to other senior leaders.

He said that according to Wang, Gu believed Heywood had abused or taken Bo family funds to which the Briton might have had access. Heywood's family members said he had no business dealings with the Bos.

CONFRONTATION

The source's account of Wang Lijun's accusations tallies with details that have emerged about the drama that unfolded before he took flight to the U.S. consulate in Chengdu, where he stayed for 24 hours before officials coaxed him out.

The emerging accounts help explain why central leaders decided to risk the aftershocks triggered by unseating Bo, an ex-commerce minister known both for revolutionary style populism and for his courting of multinationals.

By the time Wang arrived at the U.S. consulate, his relationship with his long-time patron, Bo, had already curdled into mutual distrust, said the source.

According to the source and previous accounts reported by Reuters, Wang feared that Bo, eager to preserve his reputation and chances for a spot in the next central leadership, could turn on him after central party investigators began probing Wang's past.

About a week before his flight to the consulate, Wang told Bo about his suspicions about the death of Heywood, a business consultant who was instrumental in Bo's son attending Harrow, an exclusive private school in England.

Heywood knew the Bo family from the time when he lived in China's northeastern port city of Dalian, where Bo was mayor from 1993 to 2000.

"(Wang) told Bo that the problem couldn't be covered up," said the source.

Bo was outraged, said the source, who has met both men. Days later, Bo demoted Wang to the much less powerful role of vice mayor for education, culture and science.

Bo initially tried to muffle the allegations, but the former police chief's flight to the consulate brought the rupture between the men into the open, said the source.

Even if Wang's suspicions over Heywood's death prove unfounded, Bo's initial failure to report the case could end his political career, said the source.

"In the central leadership's view, that was too late. They said he should have reported the problem as soon as Wang Lijun raised allegations about Gu Kailai."

(Additional reporting by William Maclean in London and Mark Hosenball in Washington, D.C.; Editing by Don Durfee and Jonathan Thatcher)